I have a few more questions since all my funds are not qualified for solo 401k Rollover.
Question: I have Scudder SEP IRA with $14,000, Janus SEP IRA with $9,000 and Teamster Pension $1,600. There is a cost to set up Solo 401k, then combine and put all these into one account. Do I pay the set up fee out of my personal funds or does it need to be paid out of the retirement account?
Answer: The establishment cost is the responsibility of the plan sponsor or the employer (you). You can not use your retirement funds to pay for the establishment cost. Typically this can be a business expense for your business (check with your accountant).
Question: My Vanguard mutual funds Roth IRA of $84,000 cannot be converted to a self directed Solo 401k but can be converted to a self directed Roth IRA. In this case the funds are held in a trust? Is this something I do separately on my own or do you do this and if so what is your fee?
Answer: Self-directed IRA is set up with a custodian, your IRA funds are held by the custodian. We work with IRA Services Trust company for self-directed IRAs, they can assist you with the account set up.
Question: What is your affiliation with IRA Trust Services Company? Your company or a vendor you use? Is there any fee to you or just to them according to the fee schedule PDF?
Answer: We have relationship with several custodians, but we been working with them the longest and refer most of our clients to them. They have been around for over 30 years and have lowest fees in the industry. We don’t get any of their fees, it all goes to them based on their fee schedule. Please contact them directly for any questions about their fees or services they offer.
Question: All these fees drawn out of retirement account or do I pay separately from my personal bank account?
Answer: The fees are normally deducted from your account, however, you have the ability to pay those fees out of your personal checking account.
Question: Is the best way to set up have all rental income held by prop manager in a separate account and let it accumulate and use this pool of money to pay for recurring expenses. Then once a year transfer most of the money back to the Self directed Roth IRA leaving $1,000 in the property managers account for the next years expenses. Repeat this process at the end of each year? Or Jan the following year? That way I don’t get nailed for many cash disbursement fees for property expenses and maintenance and get nailed for 24 rent deposits fees into the trust account?
Answer: There are no fees for deposits, however, what you described above is a great strategy and I recommended it to some of my clients to save on the custodian fees.
Continue to Part II